Commission acts to reduce telecoms
regulation by 50% to focus on broadband competition

As part of its package of telecom reform proposals
presented today (see IP/07/1677), the European Commission has adopted a new
Recommendation on the markets where telecom-specific regulation should take
place. The original 2003 version of this Recommendation listed 18 retail and
wholesale markets where the Commission considers that specific ex ante
regulation is required by national telecoms regulators to deal with competition
problems. To reflect the progress made in the past years in most EU Member
States in terms of competition and consumer choice, the Commission concluded
that in principle there is no need for regulators to intervene in half of these
markets. At the same time, this move will allow regulation to better focus on
the main bottlenecks in the telecoms sector.

"Our decision today shows that this Commission is taking the principle of
better regulation seriously," said Viviane Reding, the EU Telecoms
Commissioner. "Where telecoms markets tend towards effective competition, we
no longer need sector-specific regulation. We should instead concentrate
regulation on those markets where structural competition problems persist, such
as access to high speed broadband services. This is where almost all of the
national telecoms regulators have identified serious and sometimes evengrowing competition problems. Let me at the same time stress that the markets
phased out by the Commission today do by no means risk falling into a kind of
regulatory "no-man's land". Markets no longer covered by ex ante regulation are
subject to the scrupulous scrutiny of competition authorities which have
powerful instruments at their disposal to investigate and sanction
anti-competitive behaviour."

Neelie Kroes, EU Commissioner for Competition said "I am very much in
favour of de-regulation where competition is progressing to the benefit of
consumers, as in the telecoms sector, even if I am in favour of regulation where
competition is not developing, as in the energy sector. Today's adoption of the
new Market Recommendation confirms that the Commission keeps its promise to
reduce the level of public intervention when it is no longer warranted. This
message should further encourage investment in the European communications
industry."

The Commission's original Recommendation of 2003 specified 18 markets where
ex-ante regulation by national telecom regulators (such as retail or wholesale
access or price regulation) could be justified. All these markets had to be
regularly analysed by national regulators and notified to the Commission in the
so-called "Article 7 procedure" (see MEMO/07/457). Since 2003, the Commission
has had to assess more than 700 such notifications.

Today, following a broad public consultation and a close dialogue with
national telecoms regulators and competition authorities, the Commission has
decided to reduce this list (partly by merging markets) by 50%. The Commission
thereby intends to relieve significantly the regulatory burden on industry and
regulators.

Most of the retail markets on the list were removed since effective
wholesale regulation, checked by the Commission, serves in all EU Member States
to protect retail users. A number of wholesale markets were also removed
after most national regulators had found these markets to be effectively
competitive.

The markets now removed from the Recommendation cover:

National/ local residential telephone services from a landline (Market
3)

International residential telephone services from a landline (Market 4)

National/ local business telephone services from a landline (Market 5)

For these markets, the
Commission no longer sees an a priori case for sector-specific ex ante
regulation by national telecoms regulators; these markets should now be
primarily dealt with by competition authorities using ex post instruments. It
remains, however, possible for a national telecoms regulator to demonstrate, by
a solid market analysis, that in its country, competition is still seriously
hampered on one of the above markets. Under such circumstances,
telecoms-specific regulation could be continued. This could be especially
relevant for some of the EU's newest Member States.

From today onwards, the Commission and national regulators will be refocusing
their efforts on those markets where competition is not yet effective and where
consumer benefits are still largely lacking:

[1] The problems on this
market were effectively tackled by the EU Roaming Regulation that entered into
force on 30 June and ensured that roaming charges were reduced by 60% (see
IP/07/1445). A decision whether this regulation will be extended to cover data
roaming services will be taken before the end of 2008.